Today's Quote:
Instead of taking the pants off the taxpayer it might be better to take the vest off the vested interests.~ Mark Twain

Key Points to Know about Early Retirement Distributions

Some people take an early withdrawal from their IRA or retirement plan which, in many cases, triggers an additional tax on top of the regular income tax you may have to pay. Here are some key points you should know about taking an early distribution:

Early Withdrawals: An early withdrawal normally means taking the money out of your retirement plan before you reach age 59½.

Additional Tax: If you took an early withdrawal from a plan last year, you must report it on your tax return. In addition, you may have to pa an early withdrawal penalty of 10 percent tax, which is added to your regular income tax liability..

Nontaxable Withdrawals: The 10 percent penalty does not apply to nontaxable withdrawals, which includes contributions that you paid tax on before you put such contributions into the plan.
For example, rollovers are a type of nontaxable withdrawal. A rollover occurs when you take cash or other assets from one plan and contribute the amount to another plan. You normally have 60 days to complete a rollover to make it tax-free.

Exceptions to 10% Penalty: There are many exceptions to the additional 10 percent penalty tax. Some of the rules for retirement plans are different from the rules for IRAs.

File Form 5329: If you made an early withdrawal last year, you may need to file a form with your federal tax return. See Form 5329, Additional Taxes on Qualified Plans (Including IRAs) and Other Tax-Favored Accounts, for details.

Updates

Tax Changes for 2014

Several important tax changes went into affect in 2014. Depending on your income, age, marital status, or whether you operate a business, you could be affected.

IRS Collects $2.9 Trillion During Fiscal Year 2013

During fiscal year 2013, the IRS collected almost $2.9 trillion in federal revenue and processed 240 million returns of which 151 million were filed electronically. Out of the 146 million individual income tax returns filed, almost 83 percent were e-filed. More than 118 million individual income tax return filers received a tax refund, which totaled almost $312.8 billion. On average, the IRS spent 41 cents to collect $100 in tax revenue during fiscal year 2013.

Over 99% of All Returns Unaudited

The IRS examined just under one percent of all tax returns filed and about one percent of all individual income tax returns during fiscal year 2013. Of the 1.4 million individual tax returns examined, over 39,000 resulted in additional refunds.

Seven States With No Personal Income tax

Seven states do not have a personal income tax. They are: Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming. New Hampshire and Tennessee do not tax wages. They tax investment income from stocks and bonds.

How the IRS Flags Excessive Travel Expenses

The IRS uses occupational codes to measure typical amounts of travel by profession. A tax return showing 20 percent or more above the norm might get a second look? Here are a few other red flags that can trigger an IRS audit.

Did You Rob a Bank Last Year?

Silly as it may seem, if you robbed a bank dung 2013, you had taxable income. Intentionally not reporting ill-gotten gains is considered tax evasion. The IRS doesn't care how we "earn" our loot as long as they get their cut, from a tax compliance standpoint of course. So, if you're selling drugs or scamming investors and not reporting the income, some day you could find yourself in the same predicament that Al Capone found himself in! Here are some of the top tax myths.